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Sunday, April 10, 2011

United Kingdom: Government Paper Calls for Examining Future State Pension Age Increases

During the same week that the United Kingdom's law removing the default retirement age that had allowed companies to force workers to leave at 65 went into effect, the Department for Work and Pensions released a consultation setting out on how to simplify the state pensions system for future pensioners, including looking at processes for future increases in the retirement age. The consultation--A state pension for the 21st century--notes that longevity increases already have figured in raising the pension age to 66 by April 2020, but that increases in longevity do not end in 2020 and it is only fair that those generations who will benefit from these increases share in the costs.

Specifically, the government is asking (1) What mechanism should be used to determine future increases in State Pension age? and (2) How should the Government respond to the frequent revisions in life expectancy projections while giving individuals sufficient time to prepare? The paper suggests some possibile mechanisms, such as increasing the age through a formula linked to life expectancy, or alternatively increasing the by puting in place a review at regular, pre-determined intervals.

As noted in an article in The Telegraph before the paper's release:

However Mr Duncan Smith said the Government was preparing to increase the retirement age further because people are living longer and "don't feel like retiring at 65".

Mr Duncan Smith told the Murnaghan programme on Sky News: "The last Government already set projections to 67, 68 ... and we are revising those to look again.

“There is no question, no point in hiding the fact that retirement will have to move over a period, obviously to help people adjust, for two reasons.

"First of all, because we are living longer, most people don't feel like retiring at 65. We have many, many thousands now choosing to work beyond 65 and that's why we lifted that thing called the default retirement age, where you could be forced into retirement."